16 April 2025
Open any financial newsfeed in 2025; the story will change by the hour. On Monday, global headlines tout a "great rotation" into emerging markets, with Asia-Pacific equities enjoying a new dawn.
By Tuesday, it was a tale of U.S. investors switching to UK markets, drawn by perceived stability, strong regulation, and post-Brexit reform momentum. Come Wednesday, the tone pivots sharply again; this time, it’s all about cash, capital preservation, and cutting risk exposure entirely.
It seems that investors are navigating a world where strategy is increasingly short-lived, and conviction is as fleeting as the latest macro data point.
The past eighteen months have seen a relentless stream of market shocks: persistent inflation, volatile interest rate guidance, geopolitical tensions, AI-fuelled tech rallies, and now, a likely tariff-driven slowdown in global growth.
The result is that investors are no longer just uncertain; they’re exhausted. As one adviser noted in a recent FTAdviser piece, clients are “overwhelmed by conflicting narratives” and struggling to commit to a long-term course of action.
Strategies that would have once lasted years are now measured in weeks. From family offices to institutional allocators, the appetite for enduring risk has dwindled. Nobody wants to be early, and everyone fears being wrong.
This sentiment shift is evident in allocation flows. In Q1 2025 alone, we’ve seen strong movement into APAC equities, buoyed by China's regulatory easing and bullish broker forecasts from Japan to Vietnam. But just as that momentum builds, a pullback begins, driven by renewed inflation fears and political uncertainty.
At the same time, the UK is experiencing a quiet renaissance in investor interest, with the capital markets reform agenda and Long-Term Asset Funds (LTAFs) drawing attention. For a brief moment, London feels like the new “safe” play, but that narrative is soon overshadowed by the enduring attraction of U.S. tech and private credit amid seemingly ever-rising UK government borrowing costs.
Then the cycle resets, and suddenly, cash is king again.
One standout trend is the resurgence of liquidity as a strategy; cash and equivalents, once considered idle assets, have become a deliberate choice. With the Bank of England’s base rate at 4.5%, UK-based money market funds attracted over £11 billion in net inflows in 2024 alone. Investors are no longer afraid of holding cash; in fact, they’re leveraging it to buy time.
It’s not just risk aversion; it's optionality and mental space. Holding liquidity allows investors to wait, assess, and strike with clarity. It reflects a world where long-term conviction is in short supply and capital flexibility is the new alpha.
Perhaps the most significant consequence of this volatility is the erosion of the traditional investment time horizon.
Advisers report that more clients are avoiding five-year outlooks in favour of “rolling six-month strategies”. Portfolios are being built not around destination goals but pivot points such as expected interest rate decisions, earnings seasons, and election cycles.
This reactionary mindset may preserve capital in the short run, but it carries risk: chasing headlines can lead to poor entry and exit timing, especially when the macro picture is as contradictory as it is today.
In 2025, investors aren’t driven by greed or fear; they’re driven by confusion. The signals are noisy, the rules keep shifting, and the cost of being wrong - even briefly - feels too high. As a result, portfolio strategies are fluid, conviction is diluted, and liquidity has become a sanctuary.
This isn’t a market defined by strong trends or bold calls. It’s defined by hesitation and therein lies the opportunity.
There's immense value to unlock for advisers and allocators who can help investors stay prepared without constantly reacting. In the end, the best-performing portfolios may not be the most aggressive or the most defensive; they may simply be the most patient.
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